How can you protect your credit rating this Christmas?

The average Aussie spends nearly $600 on gifts for friends and family alone, according to Commonwealth Bank figures, with the cost of entertaining and feeding our loved ones bringing total expenditure up to almost $1,000 each. This generosity could have an impact on your credit rating, particularly as 40 per cent of people in a 2016 finder.com.au study admitted they would use a credit card or loan to fund their Christmas spending. Here are some ways to avoid blowing your budget this Christmas and keep your home ownership dreams on track.

1. Set a budget (and stick to it)

Impulse purchases can be devastating for your bank balance, which is why you should always plan how much you can afford to spend before you hit the shops. Make a list of everyone you intend to buy gifts and shop around online for the lowest prices. The earlier in the year you start planning for Christmas, the better. That way, you can begin putting money aside each month to fund the festive season.

2. Avoid ‘hard’ credit enquiries

Every time you apply for credit, the provider will make an enquiry into your credit history. This is known as a ‘hard’ credit enquiry, and they can negatively affect your rating, especially if you make several applications within a short space of time. You should therefore avoid applying for credit cards or loans to fund Christmas spending, as home loan lenders may see this as a warning sign that you’re struggling for cash.

3. Don’t be afraid to use credit responsibly

While it may sound counterproductive, using your credit card responsibly can improve your credit rating. Lenders are often wary of approving loans and other forms of borrowing to people with zero credit history. The trick is to remain active without building up substantial debt and interest charges. In other words, you can use your credit card to fund some of your Christmas spending, but make sure you’re able to pay off the balance at the earliest opportunity and never miss your repayments. Would you like to learn more about how to get a loan in Australia? Contact our team of loan specialists to discuss your needs